Estate planning documents everyone should have
A common notion is that without a large estate, there is no need to create a will, trust or other estate planning documents. But whether or not a person is in the "1 percent" is irrelevant to the need for a good estate plan. While many people have retirement savings, life insurance and other financial planning necessities, estate planning often falls by the wayside. According to one survey, 41 percent of baby boomers in America do not have a will.
Certainly an estate plan can reduce estate taxes if needed. Estate planning documents can also ensure that certain property goes to certain individuals, for example. Yet even if an individual has relatively few assets to distribute upon death proper estate planning can ease the financial and emotional burden on family members towards the end of life.
A will or trust
Without a will, a probate court determines how the deceased's property will be distributed. The court determines beneficiaries based on state intestate laws. If the deceased has a will, the estate will go through probate. A trust, on the other hand, may not need to go through court, which can save time when distributing assets. Whether through a will or trust, or both, an estate plan reduces arguments and stress for beneficiaries of an estate.
Financial power of attorney
A financial power of attorney is also necessary for everyone no matter their financial situation. A financial power of attorney allows a trusted friend or family member to pay bills on behalf of a person who is no longer capable of doing so. A financial power of attorney allows someone else to pay for necessary living expenses, collect Social Security, invest money, handle retirement accounts and perform other financial tasks. Many people name their spouses as their durable power of attorney in the event something happens to them or even just to be able to handle routine finances if they are out of town.
A healthcare power of attorney
A living will is separate from a last will and testament. A living will, also known as a health care proxy, gives instructions to doctors regarding medical care should the creator not be able to speak on his or her behalf. A living will can save family members an extraordinary amount of hardship by specifying what medical care should be given if a person falls into an end-stage condition or vegetative state.
A medical durable power of attorney appoints someone to be a healthcare agent. That person can make medical decisions, such as to appropriate treatment, on behalf of the person who cannot make decisions on his or her own. A durable power of attorney is only effective if the person is mentally or physically incapable of making healthcare decisions.
Representation can save money
Many of these documents are available online. Unfortunately, these "cookie cutter" documents do not take individual circumstances into account, or even specific state laws. That is why it is necessary to hire an experienced, skilled estate planning attorney to ensure that assets, financial matters and healthcare decisions are done according to the wishes of the person who created the estate plan.
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